Longyu and her 20 friends are in Mexico | Hidden Currents to See the World

Writer | Ren Qian

Editor | Liu Jing

The US presidential election has brought an earthquake-like impact to the world.

This election has shown us the complexity of Trump's supporters: they do not conform to stereotypes; they have hidden biases that sometimes surface; beneath the economic demands lies a deeper cultural and identity recognition... Europeans say they can no longer understand this country, or even the way American society and politics operate. And yet, it is such a country that influences the future of the world.

During the campaign, in addition to China, Mexico, which has recently become a prominent destination for overseas expansion with a population of nearly 130 million, has once again become the center of the storm for his radical positions on trade, immigration, and drug trafficking. Some people inevitably worry: "Has the logic of Chinese VCs investing in Mexico collapsed?"

In the midst of market restlessness and anxiety, we interviewed Long Yu, the founding managing partner of BAI Capital. Long Yu has her own understanding of this issue.

This National Day, during the swearing-in of Mexico's new female president, BAI Capital organized more than 20 entrepreneurs and their families to travel to Mexico. This trip, which Long Yu calls the "Game within a Game within a Game", is also a concentrated display of BAI's exploration of internationalization.

Back in 2015, when the first generation of the mobile Internet went overseas, BAI actually had some international investment layouts such as Bigo Live, Club Factory, OPay, etc., but they were sporadic at that time. In 2020, BAI quickly led the Series A+ round of Stori and continued to increase its investment in each subsequent round - this is also the company in Mexico where BAI has made the most "bold bet". At the same time, they also invested in another 6 Mexican companies.

In early 2019, we interviewed Long Yu. At that time, she talked about BAI's gains and regrets in the past decade or so. Undoubtedly, this is a fund that has grown up with the era of China's mobile Internet. From the initial small steps to the gradual improvement, BAI has proved its unique existence with a boutique fund strategy.

But when the original main narrative was disrupted, BAI quickly found a new path. We talked with Long Yu about the internationalization of Chinese companies, the risks and opportunities in Mexico, and the current fund survival methodology.

"Waves Watching the World" is a new column of Waves. Over the past three years, we have launched a series of globalized content, and next we will launch a more systematic series of reports. Mexico is the research focus of our first stage.

The following is the main text of the conversation:

The Game within a Game within a Game

"Waves": Let's first talk about this trip.

Long Yu: This is not a spur-of-the-moment trip. We spent more than half a year preparing for the 9-day and 8-night Mexico itinerary, taking 20 friends to fly for 22 hours to the other side of the world. We carefully created a field to enable in-depth collisions between China's new-generation entrepreneurs and Mexico's top political and business leaders.

We deliberately arranged to come to Mexico City during the swearing-in of Claudia Sheinbaum, Mexico's first female president, to feel the vigor of the entire country's determined reform and thriving. Claudia Sheinbaum, who learned ballet since childhood and is elegant and dignified, often appears with a signature high ponytail. She also holds a doctorate in energy engineering and is hailed as the "Mexican Merkel". During her tenure as mayor of Mexico City, she achieved remarkable political achievements and won with an overwhelming vote of nearly 60%.

BAI has been cultivating in Mexico for five years and has a deeper understanding of the pros and cons of its dependence on the political and economic situation in North America, especially the United States. In just two months, both countries have ushered in new presidents. Looking back on our conversations at that time, they are indeed meaningful.

When it was time to say goodbye, everyone told me that this was a top-level experience, and some even said that their lives had been elevated. I also felt that I had finally lived up to their trust.

"Waves": Can you be more specific about who you met and what you discussed?

Long Yu: The new Minister of Economy, Marcelo Ebrard, who is also the head of the cabinet, rushed back from the hurricane relief site on the third day of his tenure to receive our entrepreneur delegation. The two-hour conversation got straight to the point, and he gave the sharpest and most honest assessment of the issues that everyone is most concerned about, such as the renewal of the USMCA and the competitive and cooperative relationship between China, the US, and Mexico.

While emphasizing the inseparable relationship with the United States and the challenges that Chinese companies will face due to more stringent regulations and tariffs, Marcelo also showed a positive attitude towards China-Mexico cooperation. He welcomes direct Chinese investment in the local Mexican market, such as in consumption, finance, and service industries. The colleagues in the Ministry of Economy highly affirmed BAI Capital's investment achievements in Mexico, especially praising our support for Stori in promoting fintech, driving consumption growth, attracting international talents, and rapidly emerging as a model for Mexican startups.

Regarding the recent much-discussed judicial reform in Mexico, he straightforwardly pointed out that the previous judicial system in Mexico was controlled by the multi-faceted influence accumulated over generations by about 800 vested interest families, resulting in inefficiency, lack of transparency, and accountability. The new judicial reform aims to create a more transparent and fair business environment and social mechanism, rather than the excessive emphasis on social welfare and the left-leaning trend that caters to the liberals, as the outside world worries.

In response to further questions from entrepreneurs, he immediately asked the staff to print out a briefing on judicial reform and distribute it to everyone present, and explained it in detail. This efficient style has changed many people's stereotypical impression of Latin America as being lazy and bureaucratic.

Another small detail particularly touched us: the name cards of the Chinese guests on the scene were based on the Chinese pinyin in the passports. During the self-introduction session, for the convenience of communication, the entrepreneurs naturally used their English names to introduce themselves. To my surprise, two minutes later, the staff smoothly replaced our name cards with the English ones. The entire operation was seamless, tacit and efficient.

In addition, leveraging my connection with the HSBC board, I arranged a closed-door exchange with José Antonio Meade, the most important politician and scholar in Mexico. He has served as the Finance Minister twice, the Foreign Minister once, the Interior Minister once, and the Labor Minister once. A lawyer by profession, he was once a highly anticipated presidential candidate. It can be said that almost no one has a more profound and comprehensive understanding of Mexico's politics and economy than him. His prediction at that time that Trump would surely win the election and the subsequent policies towards Mexico and China now seem more reasonable and well-founded.

What gives me the greatest joy and inspiration is the confident, free-spirited, curious, and humble performance of the Chinese entrepreneurs who came along. The international vision, combat effectiveness, enterprising spirit, and relaxation of this group of entrepreneurs have also changed the stereotype of the Chinese "workaholics" in the Mexican business community, who are seen as ruthlessly cutting costs and leaving no grass growing wherever they go. Although we had prepared simultaneous interpretation, the vast majority of entrepreneurs were able to communicate in English with ease.

"Waves": What is your original intention in organizing a travel group with so many top entrepreneurs?

Long Yu: This trip is actually our annual "Private Directors' Meeting" of BAI.

In the past two years, the domestic venture capital industry has faced a difficult environment, and there has indeed been a lot of negative sentiment. In the moment of "total deceleration", it is easy to lose balance and direction. But I have always believed that in the face of realistic challenges, we should maintain a bottom-line thinking, but abandon the doomsday sentiment, and maintain a positive action. Accepting the reality does not mean giving up, and lying flat is definitely not the way out. I don't believe in the excuse that doing more leads to more mistakes. Instead, I want to see if there are other ways.

I often guard against homogeneous complaints, as they only bring increasingly low-quality thinking and move further away from the truth. While lamenting that the golden years have passed, there is no opportunity, no way out, waiting for Beta, and discussing when Vintage is the best, little do they know that the next era has already quietly begun.

My colleagues at BAI and I have been on the road of internationalization for many years. Every year, we spend more than half of our time flying around the world, and we find that the speed of the world's changes can only be experienced in person.

China's most outstanding entrepreneurs are seriously discussing the survival issues of the next era - the proposition of internationalization is almost something that everyone is thinking about. I have been considering for a long time how to set up a "game" for in-depth thinking, collision, and discussion to find the "way to break the game".

To set up this game, first of all, there must be a field. Everyone is no longer new to Europe, America, Japan, South Korea, and Southeast Asia. Opening up our minds on the New World, Mexico, where few Chinese have set foot, should be the most suitable. With the field, who should we invite? These people must have differences and similarities in the industry, have a similar depth of thinking, have their own successful experiences, and be full of curiosity about the outside world; they must have both connections and matches in age and interests.

"Waves": What are the specific gains after staying in a distant place for 8 days together?

Long Yu: Our final group consisted of about 20 people, including legendary entrepreneurs who grasp the pulse of China's economy with a combined annual income of over 500 billion yuan, new-generation leaders, and pioneers of Chinese enterprises going overseas, as well as strategic investors of trillion-yuan super multinational enterprises. I am very grateful for their trust and for giving us their precious National Day holiday, and some even brought their families.

So we hope to bring them a more comprehensive and three-dimensional understanding of Mexico. In addition to arranging a closed-depth tour of the renowned National Museum of Anthropology in Mexico, watching folk ballet at the Palace of Fine Arts, and strolling through the Mercado de Sonora to experience the street market economy. We also went to the magnificent Pyramid of the Sun and Moon to pay tribute to the rise and fall of civilization. This Sun City, built in 200 BC, was already one-third the size of Beijing during the Qing Dynasty.

However, when Sanxingdui entered the Bronze Age, American culture stopped at the hard obsidian. There are also traces of Trotsky's exile in Frida's Blue House. The Monterrey Museum of Contemporary Art (MARCO) is my personal favorite, a work of the architectural master Ricardo Legorreta, who uses light brilliantly and cleanly.

The collision of everyone is not a simple investigation of business opportunities, but an all-round immersive experience of humanity, politics, economy, consumption, values, culture, etc. Perhaps it is the magical energy brought by cacti and agave. In this field in Mexico, we have discovered different perspectives and markets - there are so many possibilities, but also so many "impossibilities".

The Sun Calendar Stone, the treasure of the Anthropology Museum ©BAI

"Waves": What are the most concerned issues for entrepreneurs who have never conducted business in Mexico (or even never set foot there)?

Long Yu: Crossing cycles and intergenerational inheritance are the topics we most want to learn from local entrepreneurs.

Alejandro Ramírez Magaña, the CEO of Cinépolis, entertained us at the club of old-school elite industrialists and shared how he took over a Mexican family business and successfully transformed it into the third-largest cinema chain in the world through a series of technological content and experience innovations.

In the industrial city of Monterrey, our old friend Carlos Montemayor personally accompanied us for a whole day to visit industrial parks and commercial real estate. His family owns more than half of the land in Monterrey. Just like when we played Monopoly as children, the Carlos family bought the land in Monterrey piece by piece over five generations and connected them into one piece. They are accustomed to seeing how industrial parks rise and businesses thrive on this land, and are also used to the ups and downs of historical cycles and the game between major countries.

Now, the transfer of the supply chain is a huge bonus, but Trump's new policies will also bring short-term challenges. An entrepreneur in the group made a "incognito visit" to an electronics city under Carlos and was pleasantly surprised to find his own mobile phone products. Before coming, few people realized that it is only a little over 2 hours' drive from Monterrey to the US-Mexico border.

This really reminds me of Shenzhen in 2000.

Monterrey, the "Main Artery" of the Mexican Economy ©BAI

The Two-Headed Snake on the Cactus

"Waves": What specific impacts will Trump's return to power have on Mexico?

Long Yu: Actually, during our closed-door conversations with former Finance Minister José Antonio Meade, economist Gabriel Lozano, etc. in Mexico during the National Day, they had already foreseen and frankly stated the hidden concerns and challenges of Trump's return to power.

First is the immigration issue. Trump has been emphasizing the need to strengthen border security and deport millions of undocumented immigrants. During the past two US administrations, Mexico has actually become an extension of the White House's border policy and has become the "wall" that Trump wanted to build in his first term. If Trump returns to power, he may implement the largest deportation plan in US history, targeting about 11 million undocumented immigrants living in the United States. The most common undocumented immigrants come from Mexico, accounting for about 4 million people.

Trump's inflammatory rhetoric has already caused deep fear in the immigrant community. Whether these policies are feasible or enforceable in practice, they will have a real impact on people, bringing a significant "chilling effect".

Remittance is one of the most unique and important sources of income for the Mexican economy. It has been growing for 10 consecutive years since 2014. In 2023, remittances accounted for 3.5% of Mexico's GDP, and it is expected to reach 3.7% in 2024. The high-pressure policies of the United States on immigration issues will also indirectly affect Mexico's foreign exchange income.

In the manufacturing industry, Trump will vigorously block "Yangcheng Lake". Many US companies want to build their factories in Mexico for Nearshoring, but Trump is very concerned about the transfer of US industries to Mexico. He proposed to impose punitive tariffs on cars produced in Mexico and all companies that move manufacturing from the United States to other countries.

This may have a huge impact on an industry that exports nearly 90 billion US dollars worth of finished vehicles to the United States, accounting for about 5% of Mexico's GDP. If implemented, it will undoubtedly be a huge shock wave for Mexico. Although I don't think these policies will ultimately be implemented. Excessive punitive tariffs have made many US automakers give up the idea of building factories in Mexico. Of course, I am very concerned about whether Elon Musk will make him change his mind and whether Tesla's super factory in Mexico will return to the agenda.

In addition, Trump threatened to impose import tariffs of 10%-20% on all other countries, including the European Union. Due to Mexico's very close geographical distance to the United States, especially the risk of transferring production capacity, the final result for Mexico is most likely to be greater than or equal to this number.

At the campaign rally, Trump once "shouted" to Sheinbaum that if Mexico does not stop the "massive influx of criminals and drugs", he will notify Sheinbaum.